IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

Veterans of Foreign Wars of :

Ohio Charities, et al.,

 :

Plaintiffs, 

 :

v. Case No. 2:11-cv-544

 :

Charles L. Miller, et al., JUDGE GEORGE C. SMITH 

 : Magistrate Judge Kemp

 Defendants. 

OPINION AND ORDER

This matter is before the Court on the motion for leave to

file a second amended complaint filed by plaintiffs Veterans of

Foreign Wars of Ohio Charities and Department of Ohio, Veterans

of Foreign Wars of the United States. Certain defendants

including Albert Roese, the Rick Brown Memorial Post #7941

Veterans of Foreign Wars of the United States, Inc. and the Rick

Brown Memorial VFW #7941 Charity Fund, Inc. do not oppose the

motion. The remaining defendants, however, including Charles

Miller, Patricia Miller, H.V. Christopher Post #1176 - Veterans

of Foreign Wars of the United States, Thomas L. Potts and Lonnie

K. LeMaster have filed a response in opposition to the motion. 

The motion has been fully briefed. For the following reasons,

the motion for leave to file a second amended complaint will be

granted in part and denied in part.

I. Background

Plaintiffs are non-profit corporations performing charity

and public service on behalf of Ohio veterans of foreign wars. 

They filed this action asserting civil conspiracy claims under

federal and state law RICO statutes arising from the defendants’

alleged installation, maintenance and operation of illegal gaming

machines. They also assert a state law breach of contract claim

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in connection with this conduct. The same defendants opposing

the current motion for leave to amend filed a motion to dismiss

directed to the original complaint. Following the filing of that

motion to dismiss, plaintiffs filed a first amended complaint. 

According to the first amended complaint, the defendants 

have refused to distribute the appropriate net profits from

lawful charitable activities and have entered into unauthorized

financial obligations which have resulted in a breach of

contractual duties as well as fiduciary duties owed to the

plaintiffs and to the members of the defendant Posts #1176 and

#7941. 

II. The Motion for Leave to Amend

Through their proposed second amended complaint, plaintiffs

seek to clarify their allegations and to add the State of Ohio as

a defendant, based upon information they have obtained through 

investigation. Plaintiffs characterize the State of Ohio as a

“necessary, indispensable party” based on its “legitimate

interest in regulating gambling and in permitting certain

gambling activities for charitable purposes.” The additional

factual allegations are set forth primarily at paragraphs 26

through 34 of the proposed amended complaint and relate to events

on or after September 28, 2010, involving plaintiffs’ review of

the financial records for Post #1176 and the decision to place it

in receivership. In support of their motion, plaintiffs rely on

the liberal amendment standard under Fed.R.Civ.P. 15(a) and

assert that the objecting defendants will not be prejudiced by

the proposed amendments.

In response, the objecting defendants argue first that the

proposed factual allegations are not significantly different from

the allegations of the first amended complaint making any

amendment unnecessary. In passing, they state that these

allegations are speculative and contain conclusions of law and do

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not support any claim for relief. Their argument addressed to

the proposed addition of the State of Ohio as a defendant is only

slightly more substantial. These defendants dispute the

plaintiffs’ characterization of the State of Ohio as an

indispensable party and assert that the proposed amended

complaint fails to state a claim against the State of Ohio. They

contend also that under the plaintiffs’ definition of

indispensable party, other individuals or entities that have not

been named as defendants should be considered indispensable

parties. Based on this contention, these defendants speculate

that plaintiffs will seek additional amendments and assert that

the plaintiffs’ repeated efforts to cure pleading deficiencies

has resulted in undue prejudice.

In reply, plaintiffs contend that the focus of their amended

complaint is the addition of the State of Ohio as an additional

party. They claim that the State of Ohio is an indispensable

party because of the “numerous violations of state laws, relating

to the prohibitions of gambling, illegal use of bingo permits,

illegal use of liquor permits, and deceptive practices in

consumer transactions....” Further, they argue that the State of

Ohio is an “appropriate party” because of its “constitutional

police powers and statutory authority for the enforcement of

anti-gambling statutes.” Finally, they contend that they

reported the alleged operation of illegal gaming machines to the

Ohio Attorney General’s Office. For all of these reasons, the

plaintiffs assert that the State of Ohio’s presence is required

in this case in order for the Court to fashion appropriate relief

in the event of a finding that the defendants violated state

laws. 

Additionally, with respect to the defendants’ assertion that

other individuals or entities must also be named as indispensable

parties at this stage, the plaintiffs contend that currently

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there is not sufficient information to support the naming of

additional parties. Finally, the plaintiffs contend that because

discovery has not begun and the preliminary pretrial conference

has not yet been held, any claim of prejudice is without merit.

III. Legal Standard

Fed.R.Civ.P. 15(a)(2) states that when a party is required

to seek leave of court in order to file an amended pleading,

"[t]he court should freely give leave when justice so requires." 

The United States Court of Appeals for the Sixth Circuit has

spoken extensively on this standard, relying upon the decisions

of the United States Supreme Court in Foman v. Davis, 371 U.S.

178 (1962) and Zenith Radio Corp. v. Hazeltine Research, Inc.,

401 U.S. 321 (1971), decisions which give substantial meaning to

the phrase "when justice so requires." In Foman, the Court

indicated that the rule is to be interpreted liberally, and that

in the absence of undue delay, bad faith, or dilatory motive on

the part of the party proposing an amendment, leave should be

granted. In Zenith Radio Corp., the Court indicated that mere

delay, of itself, is not a reason to deny leave to amend, but

delay coupled with demonstrable prejudice either to the interests

of the opposing party or of the Court can justify such denial. 

 Expanding upon these decisions, the Court of Appeals has

noted that:

 [i]n determining what constitutes prejudice, the

 court considers whether the assertion of the new

 claim or defense would: require the opponent to

 expend significant additional resources to conduct

 discovery and prepare for trial; significantly

 delay the resolution of the dispute; or prevent

 the plaintiff from bringing a timely action in

 another jurisdiction.

Phelps v. McClellan, 30 F.3d 658, 662-63 (6th Cir. 1994) (citing

Tokio Marine & Fire Insurance Co. v. Employers Insurance of

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Wausau, 786 F.2d 101, 103 (2d Cir. 1986)). See also Moore v.

City of Paducah, 790 F.2d 557 (6th Cir. 1986); Tefft v. Seward,

689 F.2d 637 (6th Cir. 1982). Stated differently, deciding if

any prejudice to the opposing party is "undue" requires the Court

to focus on, among other things, whether an amendment at any

stage of the litigation would make the case unduly complex and

confusing, see Duchon v. Cajon Co., 791 F.2d 43 (6th Cir. 1986)

(per curiam), and to ask if the defending party would have

conducted the defense in a substantially different manner had the

amendment been tendered previously. General Electric Co. v.

Sargent and Lundy, 916 F.2d 1119, 1130 (6th Cir. 1990); see also

Davis v. Therm-O-Disc, Inc., 791 F. Supp. 693 (N.D. Ohio 1992).

 The Court of Appeals has also identified a number of

additional factors which the District Court must take into

account in determining whether to grant a motion for leave to

file an amended pleading. They include whether there has been a

repeated failure to cure deficiencies in the pleading, and

whether the amendment itself would be an exercise in futility. 

Robinson v. Michigan Consolidated Gas Co., 918 F.2d 579 (6th Cir.

1990); Head v. Jellico Housing Authority, 870 F.2d 1117 (6th Cir.

1989). The Court may also consider whether the matters contained

in the amended complaint could have been advanced previously so

that the disposition of the case would not have been disrupted by

a later, untimely amendment. Id. It is with these standards in

mind that the instant motion to amend will be decided.

IV. Analysis

Although not clearly articulated, the primary argument

raised by the objecting defendants, at least with respect to the

proposed amendment to add the State of Ohio as a defendant, is

one of futility. The plaintiffs characterize the State of Ohio

as an “indispensable party” without citation to any Federal Rule

of Civil Procedure. The phrase “indispensable party” generally

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arises in the context of Fed.R.Civ.P. 19(b) which sets forth the

factors a Court must consider in determining whether to allow an

action to proceed or to be dismissed when a required or necessary

party, as defined in Fed.R.Civ.P. 19(a), cannot be joined. See

generally In re Classicstar, LLC, 2011 WL 652744, *6 (6th Cir.

BAP February 24, 2011). This issue typically arises in the

context of a Fed.R.Civ.P. 12(b)(7) motion to dismiss. In that

context, the Sixth Circuit utilizes a three-step analysis in

determining whether a case should proceed in the absence of a

particular party. Id. The first step involves a determination

of whether a party meets the definition for a “necessary” or,

more precisely, “required” party set forth in Rule 19(a). Id. 

If a party is not deemed “necessary,” or in terms of the Rule,

“required,” there is no need to consider the remaining steps of

the analysis. Id. at *9. That is, the issue of indispensability

does not arise until, at a minimum, a party has been found to be

required or necessary. 

Here, the plaintiffs have raised the issue of

indispensability within the context of a motion for leave to

amend. However, the Court construes their argument as one

asserting that the State of Ohio is a required, or necessary,

party as set forth in Fed.R.Civ.P. 19. See generally Vagras v.

Cimperman, 2008 WL 207692, *1 n.2 (N.D. Ohio January 24, 2008). 

As discussed above, this issue is governed by Fed.R.Civ.P. 19(a).

 Rule 19(a) provides, in relevant part:

(1) Required Party. A person who is subject to service

of process and whose joinder will not deprive the court

of subject-matter jurisdiction must be joined as a

party if: 

(A)) in that person's absence, the court cannot

accord complete relief among existing parties; or 

(B) that person claims an interest relating to the

subject of the action and is so situated that disposing

of the action in the person's absence may: 

(i) as a practical matter impair or impede the

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person's ability to protect that interest; or 

(ii) leave an existing party subject to a

substantial risk of incurring double, multiple, or

otherwise inconsistent obligations by reasons of the

claimed interest.

Fed.R.Civ.P. 19(a)(1).

In short, Rule 19(a) provides that a party is necessary if,

in that person's absence, the court cannot accord complete relief

among the parties or the person claims an interest in the action

and, in that person's absence, they might be unable to protect

their interest or might suffer inconsistent obligations. Wright

v. Linebarger Googan Blair & Sampson, LLP, 782 F.Supp.2d 593, 606

(W.D. Tenn. 2011). “In essence, required parties are those

‘persons having an interest in the controversy, and who ought to

be made parties, in order that the court may act on that rule

which requires it to decide on, and finally determine the entire

controversy, and do complete justice, by adjusting all the rights

involved in it.’” School Dist. of City of Pontiac v. Secretary of

U.S. Dept. Of Educ., 584 F.3d 253, 301 (6th Cir. 2009)(en

banc)(McKeague, J., concurring) quoting 7 Charles Alan Wright,

Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure §

1604 (3d ed. 2009) (internal citation omitted). 

In this action, the State of Ohio has not claimed an

interest in the subject of this action. As a result, the only

issue under Rule 19(a) is whether the State is necessary for the

Court to accord complete relief. “‘Rule 19(a)(1)(A) focuses on

relief between the parties and not on the speculative possibility

of further litigation between a party and an absent person.’”

Laukus v. Rio Brands, Inc., 2011 WL 4737579 (N.D. Ohio 2011)

quoting Sales v. Marshall, 873 F.2d 115, 121 (6th Cir. 1989); see

also School Dist. of City of Pontiac, 584 F.3d at 265 (Rule

19(a)(1) is concerned only with those who are already parties);

(Keweenaw Bay Indian Cmty v. Michigan, 11 F.3d 1341, 1345 (6th

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Cir. 1993 (a party is necessary if “(1) in the person’s absence

complete relief cannot be accorded among those already parties

[...].”); Bedel v. Thompson, 103 F.R.D. 78, 80 (S.D. Ohio 1984)

(“The ‘complete relief’ provision of Rule 19 relates to those

persons already parties....”). 

 Plaintiffs have not demonstrated that the State of Ohio is

necessary for the Court to accord complete relief to them as set

forth in Rule 19(a)(1)(A). Significantly, they have not even

argued as much. Rather, their basis for joining the State of

Ohio as a defendant seems to stem solely from their perception

that the State would have an interest in the defendants’ alleged

illegal gambling activities. This is not the test set forth in

Rule 19(a). 

Moreover, even had plaintiffs attempted to argue that

complete relief is not possible absent the State of Ohio’s

participation in this action, they would not have been able to

succeed in persuading the Court to grant the motion for leave to

amend as it relates to joining the State. Plaintiffs assert

claims for civil conspiracy under state and federal law and a

state law claim for breach of contract. By way of relief,

plaintiffs seek a declaratory judgment that the defendants

engaged in racketeering activity under federal and state law,

damages on the breach of contract claim, and other appropriate

relief for violations of 18 U.S.C. §§1961-1968 and O.R.C.

§2923.32. Plaintiffs also seek an order directing the

divestiture of defendants’ interest in any enterprise or real

property and reasonable restrictions upon the defendants’s future

activities or investments. 

The Court could order this relief without affecting any

interests of the State of Ohio. That is, as a practical matter

the State of Ohio’s ability to pursue any action relating to

alleged illegal gambling activities will not be impeded by any

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decision here. Consequently, plaintiffs’ argument that the State

of Ohio is a necessary party is without merit. As a result, the

motion for leave to amend to the extent that it seeks to add the

State of Ohio as a defendant will be denied on grounds of

futility. 

The remaining proposed amendments relate primarily to

factual allegations set forth in paragraphs 26 through 34 of the

second amended complaint regarding events on or about September

28, 2010. The objecting defendants do not directly raise a

futility argument with respect to these allegations but simply

state that plaintiffs are not entitled to relief. To the extent

that this could be construed as a futility argument, the

plaintiffs have made the colorable argument that these proposed

factual allegations are sufficient to withstand a motion to

dismiss. Under these circumstances, the Court believes that it

is a better exercise of discretion to permit the amendment as it

relates to these allegations. Consequently, the motion for leave

to amend will be granted to the extent that the proposed second

amended complaint sets forth allegations other than those

relating to the State of Ohio. Certainly, the objecting

defendants may pursue a motion to dismiss or other dispositive

motion addressed to the second amended complaint. 

In reaching this conclusion, the Court notes that the

objecting defendants make very brief reference to undue prejudice

they will suffer if the proposed amendment is permitted. This

bare assertion, standing alone, is insufficient to demonstrate

undue prejudice. Further, this case is in its early stages and

the permitted amendments do not set forth additional claims. 

Under this circumstance, the Court cannot conclude that these

defendants would be required to expend significant additional

resources, or suffer any other kind of prejudice, as a result of

defending these new allegations.

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V. Conclusion and Order

For the reasons set forth above, the motion for leave to

file a second amended complaint (#12) is granted in part and

denied in part as set forth above. Plaintiffs shall file a

second amended complaint consistent with this order within seven

days.

VI. Procedure for Reconsideration

Any party may, within fourteen days after this Order is

filed, file and serve on the opposing party a motion for

reconsideration by a District Judge. 28 U.S.C. §636(b)(1)(A),

Rule 72(a), Fed. R. Civ. P.; Eastern Division Order No. 91-3, pt.

I., F., 5. The motion must specifically designate the order or

part in question and the basis for any objection. Responses to

objections are due fourteen days after objections are filed and

replies by the objecting party are due seven days thereafter. 

The District Judge, upon consideration of the motion, shall set

aside any part of this Order found to be clearly erroneous or

contrary to law.

This order is in full force and effect, notwithstanding the

filing of any objections, unless stayed by the Magistrate Judge

or District Judge. S.D. Ohio L.R. 72.4.

/s/ Terence P. Kemp 

United States Magistrate Judge

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